Sydney, 15 October 2014 – Foreign retailers are creating a ‘space race’ for the owners of regional shopping centres across Australia – particularly in Sydney and Melbourne.
CBRE’s latest Retail MarketView report highlights that roughly 1 million square metres of regional shopping centre space will be completed in the next three years, with a key driver being the ongoing influx of offshore retailers.
CBRE’s Head of Research, Australia, Stephen McNabb, said overseas retailers had been vying for some time for prime CBD shopping centre space. Now, the focus was broadening - helping to underpin significant expansion plans for regional shopping centres such as Macquarie Centre in Sydney (35,000sqm), Westfield North Lakes in Brisbane (29,800sqm), Pacific Fair on the Gold Coast (49,000sqm) and Chadstone Shopping Centre in Melbourne (19,600sqm).
“Foreign retailers often have larger than average store formats and they are demanding prime locations within shopping centres,” Mr McNabb said.
“To that end we’ve seen landlords increasingly look at how they can expand and redevelop their centres to accommodate this market segment. It’s created an extremely competitive environment in which discount department stores are needing to refresh and reinvent themselves to combat offshore fast fashion retailers who are taking an increased market share.”
Mr McNabb added; “We expect all of Australia’s major shopping centres will eventually contain foreign retailers if they can accommodate them, either through tenant repositioning or expansion.”
CBRE’s National Director, Retail Services, Alistair Palmer said the expanded focus of foreign retailers was exemplified by the $440 million expansion of Macquarie Centre, the transformation of which would be officially unveiled tomorrow. The centre will increase in size to 138,500sqm to be the largest shopping centre in NSW.
“Macquarie is the first suburban centre in the country to have virtually all of the big international fast fashion brands, including H&M, Zara, Uniqlo, Forever 21 and GAP,” Mr Palmer said.
“The expectation is that Macquarie will trade the lights out and be the first of many centres that will redevelop to include these brands, which are continuing to scour for opportunities in Australia.”
Tim Starling, CBRE Associate Director, Retail Tenant Representation, linked the heightened interest to the fact that Australia was still a relatively “immature” market in terms of the representation of global retail brands.
“Globalisation of retail, first and foremost, is driving the shift as Australians now expect to be able to shop these luxury and international brands,” Mr Starling said.
“Home markets for many of these retailers have matured in North America and Europe and most of these brands now have Asia presence, so Australia is relatively easy to bolt on as a country given that the APAC distribution network is already in place.”
Other drivers include the existing success of brands in Australia such as Zara, Tiffany & Co, Costco and H&M, which recently opened one of its largest global stores in Melbourne and enjoyed an opening turnover of $21 million in the first eight weeks.
These brands have to date largely targeted prime shopping strips, helping to boost national super prime net face rents up by 3.6% in the first three quarters of 2014 according to CBRE’s MarketView.
This was driven largely by a 12.5% increase in Sydney - the strongest rental uplift since Q1, 2014.
Other points noted in CBRE’s Retail MarketView include:
+ Circa $6.2 billion in retail property was transacted in the in the four quarters to September 2014. While this is 8% lower than the previous corresponding year, it easily outperforms the 10 year average of circa $4.5 billion
+ National retail yields have continued to compress but at a moderate pace
+ The ‘booming consumer’ story linked to strong retail sales growth of late 2013 is easing back. Retail sales are expected to moderate over the next 12 months and grow in line with underlying fundamentals i.e. GDP and wages growth
+ Buoyant housing activity is driving investor demand for large format retail property
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